Elliott Management Corp Founder Paul Singer stepped up his criticism of the unprecedented monetary stimulus unleashed by the Federal Reserve and other major central banks in Europe and Asia in the wake of the financial crisis, arguing that ballooning asset valuations and consumer debt pose even greater risks to the economy than they did back in 2008.
Singer, who discussed his views with David Rubenstein during an appearance on "The David Rubenstein Show,” said he doesn’t believe the market’s confidence in central bankers is justified. He also criticized the Obama administration’s “growth suppressive” fiscal policies.
“I’m very concerned about where we are in terms of the financial system, the American economy, the global economy. After nine years of what I would regard as monetary extremism, combined with growth-suppressive fiscal policies regulatory and tax, it's created a distorted recovery and its partially responsible for this exacerbation of inequality and the incomplete recovery has caused this middle-class stress and edginess around the world that has led to fringe policies and fringe thoughts – you know populism.
After nine years of this artificial levitation on the part of financial assets, high-end real estate, art, the things that rich people buy, what we have today is a global financial system that’s just about as leveraged, and in many cases more leveraged, than 2008. I don’t think the financial system is more sound. I don’t think the fixes that have been put into place have actually created a sound financial system.
I don’t believe confidence is justified in policy makers and central bankers and the fact that confidence has not been lost up to now is obvious. But if and when confidence is lost, I think it could be lost in a very abrupt fashion causing, conceivably, a ruckus in stock markets and bond markets.”
Elliott Management Corp, the activist hedge fund founded by Singer in 1977, made headlines last year when the government of Argentina agreed to pay it and three other funds nearly $5 billion to settle claims on bonds that Argentina had defaulted on 15 years prior.
The Fed has telegraphed its intentions to raise interests and unwind its balance sheet seemingly no matter what happens with economic data, and some believe the ECB could soon follow suit by tapering its own asset purchases as the universe of available bonds grows precariously thin. Meanwhile, at the BOJ, pressure is mounting for the central bank to reevaluate its own asset-buying program.